East End Crossing Achieves Financial Close

Almost a year to the day from when the procurement began, the East End Crossing P3 project has achieved financial close. Raising nearly $1 billion of public and private debt and equity funding, WVB East End Partners, made up of equal shares to WI East End (“Walsh”), VINCI Concessions Investments and Bilfinger East End Holdings, will now finalize design and begin construction of the project which consists of a new bridge over the Ohio River, a tunnel as part of the Kentucky approach, and a highway as part of the Indiana approach. Indiana Finance Authority acts as the public sponsor under the availability payment contract which was signed at the end of last year as well as the conduit issuer for the private activity bonds.

The debt portion of the financing is made up of two series of tax exempt private activity bonds. Series A, in the principal amount of $482,310,000, has maturities starting in July 2035 with final maturity in January 2051; pricing for the long bonds is between 4.56% and 4.96%. A construction financing tranche in the principal amount of $194,495,000, has a nominal maturity of January 2019, but is callable earlier as milestone payments are achieved; baseline substantial completion is scheduled for the end of October, 2016. This Series B short-term piece is priced to yield 2.28%. Lead underwriter for the deal is Bank of America Merrill Lynch, with JP Morgan, Goldman and RBC Capital as co-senior underwriters. Equity members will contribute approximately $78 million towards project costs.

As described in our earlier blogs when the P3 availability payment contract was signed, this project featured a number of firsts for a US P3 procurement and this was also the case for the financial close. East End is the first US project to achieve “flat” investment grade ratings from S&P and Fitch; according to S&P Indiana is “one of the strongest appropriation pledges in this sector” and the contract is a “…well developed public/private agreement with clear and logical risk allocation.” The project is also the first US P3 transport deal to not use TIFIA in its capital structure.

The attractive pricing for the bonds helped reduce the risk of changes in long-term muni bond rates since October, 2012, when WVB submitted their proposal, which in turn resulted in very little change in the availability payment since the bid date.

We congratulate the sponsors on reaching this major project milestone.

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